Gaithersburg’s Frederick Avenue corridor’s largest weakness is its inability to attract residents with higher incomes and spending power, according to results of the recently completed capacity study.

At a joint worksession with the City Council and the Planning Commission on Monday evening, Sage Policy Group of Baltimore presented the highlights of its Frederick Avenue Corridor and Vicinity Development Capacity Study, which analyzed the stretch of Md. 355 that lies within city limits, focusing on the successes of businesses and residential developments.

“It’s not necessarily from these numbers you see deep decline,” Sage Policy Group Chief Executive Officer Anirban Basu said. “But the corridor is falling behind. That’s what the data suggests.”

Basu described Gaithersburg’s retail vacancy rate, which stands at 3.6 percent, as the “economic Achilles’ heel” of the city, making the already struggling corridor more vulnerable to economic decay.

Sage Policy Group conducted a retail gap analysis in the corridor, which revealed a lack of consumer spending within that area. A retail gap occurs when consumers use a significant portion of their spending power outside of their own community. Currently, department stores, general merchandise stores and auto dealers comprise roughly two-thirds of all sales taking place in the corridor on a regular basis.

However, those retailers — like Costco and Lakeforest mall — make most of their sales from people living outside of the corridor zone, according to Basu.

“Corridor retailers depend heavily, more than many people might realize, on outside money,” he said. “That makes the corridor more vulnerable if outside money finds better places to shop. Now the corridor retailers are in real trouble.”

The main problem here, Basu said, is that in its current state, the corridor will likely not be able to sustain itself with enough sales from corridor residents, should outside spenders go elsewhere in the future.

Changing demographics also gave additional explanation of why retail spending is lagging in the corridor.

From 2000 to 2010, housing vacancy rates in the corridor more than doubled, going from 4.2 to 9.5 percent, while the overall city residential vacancy rate fell. A rise in unoccupied units signals less residents and less spending in the corridor.

Educational attainment was also a source of concern, with 32.7 percent of corridor residents in 2011 having a “less than some college” education level, compared to 26.4 percent in the city as a whole in 2010.

“There’s a very strong correlation between educational attainment and income, and educational attainment and income growth,” Basu said. “Income growth in much of the corridor has been extremely soft.”

The study also included a traffic analysis that looked at the average daily traffic patterns at four major Md. 355 intersections, including north of Md. 124, south of Md. 124, north of Summit Avenue, and north of South Westland Drive. Overall, the number of vehicles in those areas on a daily basis ranged from 25,000 to 40,000.

Citing the highway’s capacity to handle traffic from 40,000 to 50,000 vehicles daily, The Traffic Group President Wes Guckert said that the corridor is not dealing with a big traffic problem.

“From an average daily traffic point of view, the corridor is certainly not overburdened,” he said.

Ultimately, the city must focus on bringing higher-income earners and upscale retailers to the area in order to improve the corridor’s status. The study’s recommendations included the slowdown of multi-family and rental unit construction in favor of more single-family and townhouse structures, increased beautification efforts, more upscale commercial offerings, and the creation of a signature office building.

Basu reminded the City Council and Planning Commission that all of the recommendations — which would cost about $50 million in total — would be long-term projects for the future.

Following the presentation, Mayor Sidney Katz asked Basu what he thought would be the most feasible and effective short-term project for the city to undertake in the corridor.

Basu said he thought the first step to making changes in the corridor would be to beautify the area by adding wider sidewalks, street trees and safe bicycle paths.

“Send a message to the community and the community at large: ‘We mean business about the corridor. We’ve actually put money into the corridor. We changed the look and feel of the corridor. So get onboard,’” he said.